Bitcoin is of interest to law enforcement agencies, tax authorities,
and legal regulators, all of which are trying to understand how the
cryptocurrency fits into existing frameworks. The legality of your
bitcoin activities will depend on who you are, where you live, and what
you are doing with it.
Bitcoin has proven to be a contentious issue for regulators and law enforcers, both of which have targeted the digital currency
in an attempt to control its use. We are still early on in the game,
and many legal authorities are still struggling to understand the
cryptocurrency, let alone make laws around it. Amid all this
uncertainty, one question stands out:
is bitcoin legal?
The answer is, yes, depending on what you’re doing with it.
Read on for our guide to the complex legal landscape surrounding
bitcoin. Most of the discussion concerns the US, where many of the legal
dramas are currently playing out.
What are the concerns about bitcoin?
Government
agencies are increasingly worried about the implications of bitcoin, as
it has the ability to be used anonymously, and is therefore a potential
instrument for money laundering. In particular, law enforcers seem to
be concerned about the decentralized nature of the currency.
As early as April 2012, the FBI
published a document
highlighting its fears around bitcoin specifically, drawing a
distinction between it and centralized digital currencies such as eGold
and WebMoney. It voiced concerns that while US-based exchanges are
regulated, offshore services may not be, and could be a haven for
criminals to use bitcoin for illicit activities without being traced.
Bitcoin was the only form of currency accepted on Silk Road, an
anonymous marketplace that was only accessible over the TOR anonymous
browsing network, and which was closed by the FBI in October 2013. Silk
Road was commonly used to sell goods that are illegal in many countries,
including narcotics. This prompted US Senator Charles Schumer to
call for the site to be shut down, explicitly linking it to bitcoin, which he called a “surrogate currency”. The US Drug Enforcement Administration seized bitcoins from a US resident for purchasing a controlled substance in June 2013.
Who regulates it?
Regulators will vary on a per-country basis, but you can expect to
see national financial regulators interested in bitcoin and other
virtual currencies, potentially along with regional regulators at a
sub-country level.
FinCEN
In the US, the Financial Crimes Enforcement Network (
FinCEN),
which is an agency within the US Treasury Department, took the
initiative. It published guidelines about the use of virtual currencies.
FinCEN’s March 18, 2013
guidance
defined the circumstances under which virtual currency users could be
categorized as money services businesses (also commonly known as money
transmitting businesses or MTBs). MTBs must enforce Anti-Money
Laundering (AML) and Know Your Client (KYC) measures, identifying the
people that they’re doing business with.
CFTC
The US Commodity Futures Trading Commission (
CTFC), which looks after financial derivatives, hasn’t announced regulation yet, but has made it clear that it
could if it wanted to.
SEC
The US Securities and Exchange Commission (SEC) hasn’t issued solid
regulations on virtual currencies, but its Office of Investor Education
and Advocacy
published an investor alert to warn people about fraudulent investment schemes involving bitcoin. In particular, it warned of Ponzi schemes, after
charging
Texas resident Trendon T Shavers (aka ‘pirateat40’), founder and
operator of Bitcoin Savings and Trust, with allegedly raising 700,000
bitcoins by promising investors up to 7% weekly interest.
Legislative branch
The SEC case has forced the legislative branch of government to
consider bitcoin’s legal status. Shavers had claimed that he could not
be prosecuted for securities fraud, as bitcoin wasn’t money. However,
Judge Amos Mazzant
issued a memorandum arguing that bitcoin can be used as money.
In August 2013, the US Senate wrote to several law enforcement agencies, inquiring about the threats and risks relating to virtual currency. The letters included
this one
to the Department Of Homeland Security, fretting about the lack of a
paper trail for regulators and enforcement agencies to follow for
virtual currency transactions. It requested policies and guidance
related to the treatment of virtual currencies, and information about
any ongoing strategic efforts in the area.
November saw responses
from the various agencies. The Department of Homeland Security was the
most worried about the criminal threat from illicit use of bitcoin,
while the Department of Justice, the Federal Reserve and the Department
of Justice all acknowledged the legitimate uses of virtual currencies.
The SEC argued that “any interests issued by entities owning virtual
currencies or providing returns based on assets such as virtual
currencies” were considered securities and thus fell under its remit.
US states
Each
US state has their own financial regulators and laws, and each
approaches bitcoin differently. California and New York have been
particularly aggressive in their pursuit of bitcoin-related
organizations, for example, while others, such as New Mexico, South
Carolina, and Montana, don’t regulate money transmitting businesses. A
list of state approaches to money transmitter laws can be found
here.
In May 2013, California’s state financial regulator issued a letter
to the Bitcoin Foundation, a nonprofit organization designed to promote
bitcoin, warning it that it may be a money transmission business, and
threatening people there with potential fines and jail time.
Then, in August 2013, the New York Department of Financial Services issued subpoenas to
22 bitcoin-related companies, although these letters were more
conciliatory, asking for a dialogue to develop appropriate regulatory
guidelines for the digital currency industry. Since then, New York has
acted more positively, with the state’s Superintendent of Financial
Services, Benjamin M. Lawsky, announcing that it will accept applications for
digital currency exchanges. Lawsky indicated that these businesses will
be regulated under new New York regulation, which he committed to
having in place by the end of the second quarter of 2014.
Private sector companies (banks)
Several banks have stopped accounts owned by people operating bitcoin exchanges. In at least one case, this was because the bank was unhappy that the company involved did not have a money transmitting business (MTB) account.
The US Senate addressed the issue of banking and federal regulation
in a set of hearings held in November. The hearings were exploratory in
nature and may not lead to legislation, but feedback from agencies
included acknowledgements that there were legitimate uses for the coin.
What this means to you
The legality of bitcoin depends on who you are, and what you’re doing with it.
There are three main categories of bitcoin stakeholder. Someone may
fall under more than one of these categories, and each category has its
own legal considerations.
Users
These are individuals that obtain bitcoins, and either hoard them or
spend them. Under the FinCEN guidance, users who simply exchange
bitcoins for goods and services are using it legally.
FinCEN: “A person that creates units of this convertible virtual
currency and uses it to purchase real or virtual goods and services is a
user of the convertible virtual currency and not subject to regulation
as a money transmitter.”
Miners
According to the FinCEN guidance, people creating bitcoins and exchanging them for fiat currency are not safe.
FinCEN: “By contrast, a person that creates units of convertible
virtual currency and sells those units to another person for real
currency or its equivalent is engaged in transmission to another
location and is a money transmitter.”
Miners seem to fall into this category, which could theoretically
make them liable for MTB classification. This is a bone of contention
for bitcoin miners, who have asked for clarification. This issue has not to our knowledge been tested in court.
Exchanges
Exchanges are defined as MTBs.
FinCEN: “In addition, a person is an exchanger and a money
transmitter if the person accepts such de-centralized convertible
virtual currency from one person and transmits it to another person as
part of the acceptance and transfer of currency, funds, or other value
that substitutes for currency.”
Taxation
In 2009, the US Internal Revenue Service (IRS) posted information about the
tax applications of using virtual currencies inside virtual economies,
arguing that taxpayers can receive income from a virtual economy and
could be required to report it as taxable income. However, it based this
largely on guidance related to bartering, gambling, business, and hobby
income.
However, the IRS has not yet posted guidance on ‘open flow’ virtual
currencies that can be used outside of virtual economies. In a 27-page
report [
PDF] published in May 2013, the US General Accounting Office (GAO)
called for more guidance from the IRS on this issue.
The IRS responded that its guidance could now be taken to cover
virtual currencies as used outside of virtual economies. It added that
it was also looking at the potential tax compliance risks posed by
anonymous electronic payment systems, and was working with other federal
agencies on the topic.
In June 2013, the director of an IRS unit that investigates cyber threats also
told the Financial Times
that the use of “cyber-based currency and payment systems” to hide
unreported income from the IRS is a threat that it was “vigorously
responding to”. And at Senate hearings in November, FinCEN director
Jennifer Shasky Calvery confirmed that the IRS would be releasing more
guidance on virtual currencies. In short, don’t expect to evade taxes by
earning bitcoins instead of fiat currency.
What is the industry doing?
The industry has responded to growing regulator concerns in several ways.
- Several companies created a committee to form a self-regulatory body called DATA, designed to encourage open conversation with regulators.
- The Bitcoin Foundation formed committees to offer legal guidance, steer policy, and liaise with regulators.
- Exchanges have been attempting to secure MTB licenses at the state
and federal levels, and some have avoided doing business with US
customers until this is resolved.
Other countries
Few governments have announced any explicit intention to prevent
bitcoin use completely. However, around the end of 2013 and start of
2014 there were a series of warnings and directives from central banks
and regulators to varying degrees of severity. They ranged from the
simple “be careful, bitcoin is neither regulated nor officially a
currency”, to blocks on financial institutions and even raids on bitcoin
businesses.
Many claim to be worried about the effect that large-scale bitcoin
adoption might have on the stability of the financial system, especially
if prices are volatile.
Currently, Iceland, Bolivia, Ecuador, Kyrgyzstan and Vietnam are the
only countries that seem to have some level of bitcoin ban in place –
see the list below for more details; while others such as Russia and
Thailand seemed to have outlawed digital currencies then backtracked.
North America (non-US)
Canada
Canada has announced that
it will tax bitcoins in two ways. Transactions made for goods or
services will be treated under its barter transaction rules, while
its “Transactions in Securities” document says that profits made on
commodity transactions could be income or capital. It confirmed these rules in November 2013.
In late March 2014, the Canada Revenue Agency (CRA) published a new document
outlining its position on the taxation of digital currencies, which
highlighted out the differences between personal and business
activities.
In essence, Canada will view the matter subjectively, on a case by
case basis. When authorities deem the activities were undertaken for
profit, the taxpayer’s income will be taxed with reference to the
taxpayer’s inventory at the end of the year. Barter transactions are
allowed, but the CRA states that the value of goods or services obtained
by bartering digital currencies must be included into the taxpayer’s
income, if business related. Losses through theft or embezzlement may be
deductible.
South America
Bolivia
El Banco Central de Bolivia, the central bank of the South American nation, has officially banned
any currency or coins not issued or regulated by the government,
including bitcoin and a list of other cryptocurrencies including
namecoin, peercoin, Quark, primecoin and feathercoin.
Issued on 6th May 2014, the new policy states: “It is illegal to use
any kind of currency that is not issued and controlled by a government
or an authorized entity.” The bank went on to say that citizens are
prohibited from denominating prices in any currency that is not
previously approved by its national institutions.
Brazil
In April 2014, the Receita Federal, Brazil’s tax
authority, established how it would treat the holding and usage of
bitcoin and other digital currencies. Taking a stance similar to the one
announced by the US Internal Revenue Service in
March, Brazil is treating digital currencies as financial assets, with
the Receita Federal imposing a 15% capital gains tax at the time of
sale, however, there are some key differences that have been generally
viewed positively by bitcoin users in the country.
Those who sell less coins with a value of less than 35,000 reals
(R$), which is almost $16,000, will not have to pay the tax. This means
that bitcoin users in Brazil won’t have to calculate capital gains taxes
when making small consumer purchases. The Receita Federal is also
requiring annual account declarations from those who possess more than
R$1,000 in digital currency holdings.
Colombia
The Superintendencia Financiera de Colombia (SFC) may be close to outlawing bitcoin transactions
in the South American country, a newspaper claimed on 20th March
2014. The report said that the SFC, in conjunction with Banco central de
Colombia, Colombia’s central bank, and the Ministerio de Hacienda y
Crédito Público, the executive body responsible for budgetary concerns,
is preparing to issue a document outlining the government’s stance on
bitcoin and bitcoin-related activities.
A source connected to the Colombian Ministry of Finance told El
Tiempo that the ban may very well focus on bitcoin handling activities,
rather than outright purchase by consumers. CoinDesk is monitoring the
situation and will update this guide as the story develops.
Ecuador
In July 2014, the National Assembly of Ecuador effectively banned bitcoin
and other decentralized digital currencies while, in a novel move,
establishing guidelines for the creation of a new, state-run
currency. The law gives the government permission to make payments in
‘electronic money’, but digital currencies like bitcoin will now be
prohibited
Mexico
On 12th March 2014, the Bank of Mexico issued its first statement
on the issue of cryptocurrencies. The bank warned the public via a
statement on its website about the “the inherent risks of acquiring
these assets and using them as substitutes for conventional methods of
payment”. The warning was generally similar to those issued by many of
the world’s central banks in recent months.
However, most notable were potential restrictions for domestic
financial institutions, that some reports implied might strangle bitcoin
businesses. Translations of the statements suggest that financial
institutions regulated in Mexico “are not authorized to use or carry out
any operations with [digital currencies]“. Whether that means banks may
not deal
directly in cryptocurrencies, or may not have relationships with companies that deal in them, is not yet clear.
Europe
European Union
The EU’s banking regulator, The European Banking Authority (EBA), issued a warning statement
on 13th December 2013 warning of investment risk, but focusing mainly
on issues of fraud, tax evasion and other crime connected to virtual
currency use.
More recently, in July 2014, the EBA published
an ‘opinion’ warning financial institutions to stay away from digital
currencies until the industry is regulated. In the document, which was
addressed to the EU council, European Commission and European
Parliament, the EBA set out new requirements for the regulation of
digital currencies and also instructed financial institutions not
to buy, hold or sell digital currencies until new rules are in place.
Belgium
The National Bank of Belgium has no intention of intervening in bitcoin business or regulating it, says the Belgium Bitcoin Association. On 16th January 2014, however, the central bank issued a joint warning with
the Belgian Financial Services and Markets Authority (FSMA) that
digital currencies are not issued by any central authority, and as such
are at risk of volatility, fraud, and business non-acceptance.
Bulgaria
Bulgaria’s
National Revenue Agency (NRA), the government organisation in charge of
administering state taxes and social security contributions in the
eastern European nation, has issued new taxation guidelines for digital
currency. In a post on 2nd
April, the NRA indicated that income from the sale of digital
currencies such as bitcoin will be treated as income from the sale of
financial assets and taxed at a rate of 10%. Effectively, earnings from
bitcoin trades will be taxed on the same level as ordinary income and
corporate income in Bulgaria.
Cyprus
Long
an offshore financial services hub, Cyprus has entered the bitcoin fray
with enthusiasm and aims to be a hub for bitcoin business in the EU and
surrounding territories. It is also home to the world’s first brick and
mortar bitcoin savings institution, Neo (and its payment processing partner Bee). Still, the Central Bank of Cyprus issued a statement on 7th February 2014 warning about bitcoin’s volatility and reminding citizens it is not recognized as legal tender.
Denmark
So
far the Danish authorities have stopped short of regulating digital
currencies, although a stern warning was issued in which bitcoin et al.
were compared to “glass beads” – a reference presumably to an ancient method of trading baubles of little worth.
More significant is the nation’s stance on the taxation of bitcoin
for general transactions. Because it is not considered “real”, physical
money, bitcoin is considered a private asset and any gains are tax
exempt; similarly, losses are not deductible. However, for companies
whose sole business is related to trading or speculating in digital
currencies, gains will be taxed. By how much remains to be seen.
Estonia
Estonia’s central bank has not issued a formal statement on bitcoin but one of its managers wrote to Bloomberg
on 31st January 2014 calling bitcoin a “problematic scheme”, warning
investors assumed all risks and reminding people that bitcoin businesses
have been known to disappear overnight with customers’ money.
Finland
Finland
issued a regulatory guide to bitcoin in September 2013, which imposed
capital gains tax on bitcoins, and taxes bitcoins produced by mining as
earned income.
In January 2014, bitcoin was classified as a commodity after the
Scandinavian country’s central bank declared that it did not meet the
definition of a currency.
France
The French Senate held hearings into
bitcoin and digital currencies in mid-January 2014 that were considered
mostly investigatory and positive in tone. The focus was mainly on the
opportunities presented by the new technology and how existing laws and
organizations could be used to catch wrongdoers. Making bitcoin illegal
was not an option, according to observers, and France needed to catch up
to neighboring countries in its approach.
More recently, on 5th April, the French Ministry of Economy and
Finance said that, while bitcoin is not officially recognized by the
state, revenues generated from digital currency transactions are subject
to taxation.
“All taxpayers are required to declare all their revenues, including
those originating from abroad. This said, there is a certain tolerance
[from the state authorities] regarding minor and irregular revenues, for
instance from occasional sales,” a spokesperson for the French ministry
told
Le Monde.
Germany
Germany
is perhaps the most advanced country when it comes to regulating
bitcoin and virtual currencies. Although some issues remain unresolved,
the German government has exempted bitcoin transactions held for over one year from 25% capital gains tax. It also categorized bitcoin as a form of private money. In early January 2014 the Bundesbank repeated a warning that bitcoin was “not an alternative to national currencies”, and values were “highly speculative”.
Greece
Greece, quite remarkably, has also taken time out from its years-long government spending-related financial crisis to warn you about the dangers of bitcoin.
Iceland
One
of only two countries to have instigated a ban on bitcoin and other
digital currencies due to capital controls resulting from the banking
crisis of 2008. Personal ownership does not seem to be an issue, rather
buying (importing) bitcoins from outside the country is illegal because
it constitutes a movement of capital out of the country. Furthermore,
selling products or services for cryptocurrencies is also prohibited
The locally created digital currency auroracoin recently
made headlines with its ‘Airdrop’ to all Icelandic citizens and is not
illegal due to its provenance within the country.
However, Iceland’s Economic and Trade Committee of Parliament recently met to discuss taxation of auroracoin and
to see whether it falls within the capital controls that restrict
bitcoin. At the same time they warned of the risks of using the altcoin,
which they said is not a currency or regulated by the central banking
authorities. Frosti Sigurjónsson, Chairman of the committee, even went
as far as to say: “There is evidence however that this is a case of [a
money] scam and illegal” on his blog.
Lithuania
Lithuania,
wedged between the European Union and its largest trading partner,
Russia, issued a warning at the end of January and hinted at a ban on
non-government currencies, but later tempered the statement by saying new regulation was “under discussion”.
The Netherlands
Holland
in typically liberal style has tacitly assented to the use of digital
currencies by issuing guidelines on their tax status. Logically, bitcoin
and other cryptocoins are treated as any other currency for tax
purposes.
Slovenia
Slovenia is one of the more permissive governments towards digital currency use, though regulators there issued a statement
on 24th December 2013 to remind people that bitcoin is considered
neither a currency nor a financial instrument. The country’s Tax
Administration and Ministry of Finance also said that bitcoin is subject
to income tax like any other non-monetary income, and would be
calculated based on the bitcoin-Euro exchange rate at the time of
transaction. Selling bitcoin would not be subjected to capital gains
tax.
Sweden
Sweden’s
Finansinspektionen financial regulator now considers bitcoin as a means
of payment, following guidance issued last year. Exchanges must
register with the regulator and meet the requirements faced by other
financial institutions.
Russia
“The official Russian currency is the ruble. The use of any other monetary instruments or surrogates is forbidden,” announced Russia’s General Prosecutor’s Office in
early February 2014. “The anonymous payment systems and
crypto-currencies, including bitcoin [...] are monetary surrogates. As
such, their use by private citizens or legal entities is not allowed.”
So, bitcoin and other digital currencies seemed to have been are banned
in Russia to the shock of the bitcoin world.
However, on 6th March, Russia seemed to soften its stance in a letter
from the central bank to an individual who had asked for clarification.
In it they said that a meeting of top Russian financial authorities in
February did not result in a bitcoin ban, but rather was devoted to
“combating crimes in the sphere of the economy devoted to the use of
anonymous payment systems and cryptocurrencies on the territory of
Russia”. Furthermore, the goal of the meeting was also to “develop a
unified approach to the determination of the legal status of
cryptocurrencies”.
The exact status of cryptocurrencies in Russia is still a grey area, however, on 1st August 2014 the Ministry of Finance announced proposals
to ban the issuance of bitcoin and any operations
involving cryptocurrency. If approved, the ban will likely see those who
break the new laws end up in jail.
Ukraine
Despite the unstable political situation in early 2014, Ukraine’s central bank has still managed to issue statements
on digital currencies, saying related businesses “must register with
the agency and abide by existing laws related to the management of
electronic money”.
United Kingdom
Meetings
with policymakers in the UK in September 2013 suggested that
bitcoin-based businesses would not have to register with regulators, at
least for the time being, while they consider their regulatory position.
For a while, the UK suggested that
bitcoins wouldn’t be treated as money, but would instead be classified
as single-purpose vouchers, which could carry a value-added tax (sales
tax) liability on any bitcoins that are sold.
However, this idea was reversed in guidance
issued on 3rd March.
Although the UK tax department, HMRC, stepped back from explicitly
recognising bitcoin as a currency, its approach effectively treats it
like any other form of payment for tax purposes: “In all instances, VAT
will be due in the normal way from suppliers of any goods or services
sold in exchange for bitcoin or other similar cryptocurrency.”
Most recently, on 6th August 2014, Chancellor George Osborne announced a new initiative
that will explore the potential role of cryptocurrencies in Britain’s
economy. Osborne said he has commissioned the Treasury to produce a
programme of work on cryptocurrencies, examining their potential risks
and benefits. The results, due to be published in the Autumn, could pave
the way toward a new regulatory framework for cryptocurrencies in
Britain.
As a UK Crown dependency, the
Isle of Man is
self-governing and has also made moves over recent months to set itself
up as a regulated but bitcoin-friendly jurisdiction. In July 2014, the
island’s Financial Supervision Commission clarified the application of existing regulations
on bitcoin, indicating that digital currency businesses will not be
subject to a conduct of business or prudential regime by the commission
unless they engage in activities regulated under the Financial Services
Act of 2008, such as money transmission services. The commission also
said it is in the process of drafting a new bill that will provide it
with the ability to oversee how digital currency operators comply with
AML/CFT legislation.
Asia
China: People’s Republic of China
China’s
authorities have had arguably the biggest impact on bitcoin adoption
and values in the past months. In early December 2013, the People’s Bank
of China (PBoC) issued a statement
warning of bitcoin risks and banning financial institutions from
engaging in bitcoin business themselves or transferring funds to/from
bitcoin exchanges. Another statement just days later also blocked
third-party payment processors from dealing with exchanges, and the
price of bitcoin worldwide crashed from its record high of over $1200 by
about 50%. The moves have had a dramatic effect on the market share of large bitcoin exchanges in the country.
In mid-January, a PBoC official claimed
there is no move to suppress or discriminate against bitcoin in China,
and exchanges have been allowed to remain open for business. There does
seem to be an official campaign to limit bitcoin trade to the fringes,
however, and China’s state-owned business TV channel broadcasted a documentary the same week full of dire warnings about risks to investors from price volatility.
China: Hong Kong
Hong Kong’s Secretary for Financial Services and the Treasury issued a warning
about risks associated with bitcoin on 9th January 2014. The Special
Administrative Region (SAR) of China and financial hub has remained
otherwise hands-off in its approach to bitcoin, saying it does not pose a
risk to the financial system if it is not widely adopted.
Indonesia
Indonesia’s central bank,
Bank Indonesia, issued a warning on
16th January 2014 that bitcoin was not regarded as a currency and
accepting it as payment might even break national currency laws. No
subsequent action against exchange businesses has been taken as yet,
however.
India
India’s central bank is said to be “
watching” bitcoin. In a series of dramatic moves, the Reserve Bank of India (RBI) issued a warning about bitcoin in late December 2013, which was followed almost immediately by exchanges choosing to suspend operations. One exchange had its premises raided and
another was paid a “friendly” visit by tax officials to investigate how
digital currencies could be managed and taxed. Some exchanges have since re-opened for business.
Japan
At present there are no laws covering cryptocurrencies in the country. However, since the collapse of bitcoin exchange Mt. Gox and the attention that garnered from the international media, Japan seems to have been pressurised into taking some action.
Initially it appealed for a coordinated effort from
the international community to agree on regulation. More
recently, Japan’s ruling party, the Liberal Democratic Party (LDP) has
launched an committee to investigate cryptocurrencies, and
issued a statement saying
it is “not a currency, but taxable”. Currently the situation seems to
be that bitcoin will be treated as a good and is subject to taxation if
transactions fulfil standing tax requirements. Gains on exchange rates
are taxable too.
The government has also blocked related banks from “brokering bitcoin
transactions or opening accounts holding the virtual unit”. Exactly
what constitutes a ‘bitcoin account’ remains unknown, but it presumably
refers to one with a known bitcoin service like Blockchain.info or
Coinbase.
The Japanese government is, however, generally curious about bitcoin
and will not make any further statements on the matter until it has
discussed matters with local bitcoin interests, a government
representative has said.
Kyrgyzstan
The National Bank of the Kyrgyz Republic, the central bank of the
Central Asian nation, has said that the use of bitcoin and other digital
currencies as a form of payment is currently illegal under national law. Issued this July,
the notice states
that the only legal tender in Kyrgyzstan is the national currency,
the som (KGS), and that as such, any use of bitcoin for payment violates
this policy.
Malaysia
Malaysia’s central bank,
Bank Negara Malaysia (BNM), issued one of the shortest statements of
its kind on 4th January, cautioning people to be careful when investing
in bitcoin but otherwise saying simply, “The Central Bank does not
regulate the operations of bitcoin”.
Singapore
Singapore
is another major international financial services hub and appears to be
one of the world’s most permissive environments for bitcoin. The
Monetary Authority of Singapore has stated it “will not interfere” with bitcoin business, despite an
earlier warning
in September 2013 of the risks. In mid-January 2014 Singapore’s
taxation authority, the Inland Revenue Authority of Singapore (IRAS) sent a statement to local brokerage
Coin Republic with details on how bitcoin business would be taxed.
Bitcoin will be treated not as a currency, but as either a good or
asset, said IRAS. As a good it would be subject to GST (VAT or sales
tax) when traded to and from local currency by Singapore-resident
businesses and goods purchased with bitcoin would also be subject to
sales tax. As an investment asset, bitcoin would not be taxed as
Singapore does not have a capital gains tax.
Most recently, on March 13th 2014, MAS announced it will regulate virtual currency exchanges and ATMs,
in order to address potential money laundering and terrorist financing
risks. Such intermediaries will have to verify the identities of their
customers and report any suspicious transactions.
Taiwan (Republic of China)
The Financial Supervisory Commission of the Republic of China and the Central Bank of the ROC issued a joint statement at the very beginning of 2014 warning against bitcoin use in Taiwan. Regulators there have also said they will block any attempt to install Robocoin bitcoin ATMs.
Thailand
On March 18th 2014, after flip-flopping on the issue for the last nine months, the Bank of Thailand issued its first clear statement on bitcoin,
warning consumers that it is not a currency and that its use comes with
inherent risks. The statement bears similarities to others issued from
central banks around the world, but could be considered an improvement
in the legal status of bitcoin users, as Thailand was widely considered
to have implemented a bitcoin ban in the summer of 2013.
One issue in Thailand is not so much the legality of owning bitcoin,
but whether exchanges qualify for a licence to trade in
cryptocurrencies, which could be considered a foreign exchange activity
and therefore illegal. Hopefully, the legal status of exchanges in the
light of the new statement will become clear in coming days.
Vietnam
The second country in this list (and the world) to have banned bitcoin: Vietnam’s central bank forbade financial institutions
from using digital currencies as a means of payment or from offering
services in exchange for them back in February 2014. The country had
previously warned against their use, stating that the government and
State Bank did not recognize bitcoin as a legitimate method of payment.
All that considered, some small bitcoin businesses are still plying their trade in the Southeast Asian country and a bitcoin conference is to be held there in May.
Middle East
Israel
The Israeli Tax Authority was said to be considering
a tax on bitcoin, but no further statements have been made at the time
of writing. The Bank of Israel (BoI) and the Israeli Ministry of Finance
issued a joint statement
in February 2014 warning of investment risks as well as the dangers
digital currencies posed as vehicles for fraud, money laundering and
terror financing. However, the
Israel Bar Association ruled in August 2013 that bitcoin “is an appropriate form of payment for attorneys” and authorized its members to accept it.
Jordan
The
Central Bank of Jordan has also issued a similar warning of digital
currencies’ unregulated status in February 2014 and has prohibited
banks, financial companies, payment processors and currency exchangers
from dealing with them, particularly bitcoin.
Lebanon
The country’s central bank, the Bank of Lebanon, issued a warning
statement on 2nd January 2014 saying that bitcoin did not offer
consumer protections, had a volatile price and was often used in
criminal transactions. It advised people not to use digital currencies.
Oceania
New Zealand
Both the Governor and Assistant Governor at the
Reserve Bank of New Zealand (RBNZ) issued personal warnings in mid-December 2013, warning of risks associated with volatility, but also commenting that the technology was “interesting”.
Australia
While the Governor of the
Reserve Bank of Australia has previously warned of “speculative excesses”, the
Australian Tax Office (ATO) has now provided businesses with guidelines on how it intends to deal with bitcoin, stating that income and profits derived from bitcoin transactions are taxable.
In a letter to an individual, the ATO said that transferring bitcoins
to a private company in return for shares would count as income, and
that
transferring bitcoins to another party would be subject to Goods and Services Tax (GST). Bitcoin profits would also be subject to capital gains tax, it said.
2. Exchange trades: The other way to sell bitcoins
is to register with an online exchange. You will still have to verify
your identity, but in this case you won’t have to do as much work when
it comes to organizing the sale.
The universal way to move money around the world is international
wire transfers. Most (if not all) online bitcoin markets support this
method of transferral.
While
many of the bitcoin markets mentioned here require very little
identification from buyers, they require a lot of proof of identity from
sellers. There are few legal requirements from bitcoin markets to
record who their users are, but most (if not all) are pre-emptively
collecting identity data in anticipation of forthcoming regulations. To
make becoming a seller easier, it is worth at least considering
completing the identity verification process when you first join the
site. Getting this step out of the way can remove barriers to selling if
and when you’re ready to make the move.
The universal way to move money around the world is international
wire transfers. Most (if not all) online bitcoin markets support this
method of transferral.
While
many of the bitcoin markets mentioned here require very little
identification from buyers, they require a lot of proof of identity from
sellers. There are few legal requirements from bitcoin markets to
record who their users are, but most (if not all) are pre-emptively
collecting identity data in anticipation of forthcoming regulations. To
make becoming a seller easier, it is worth at least considering
completing the identity verification process when you first join the
site. Getting this step out of the way can remove barriers to selling if
and when you’re ready to make the move.
